Greece Needs A Timeout
The EU is willing to provide a second financial package (including private funds) but needs Greek Prime Minister George Papandreou's administration to navigate a difficult domestic passage of significant austerity measures and state asset sales. Political discourse within the Greek government is blocking the passage. As global markets roil, the onus is on Greece to fully adhere to last year's outline. The odds of the eurozone's first default are rising and the markets are pricing in the "hit" banks holding Greek debt will incur. In my estimation, Greece needs to be isolated. It is against the rules of EU membership for Greece to leave the Union but certainly a temporary leave of absence would make sense.
Market Strategy: Remain defensive awaiting a catalyst to stabilize the market decline. The upcoming earnings season will be critical in determining whether the current correction is a slowdown or meltdown.
This week's data is not the culprit . . . . .
• Initial jobless claims FELL 16,000 to 414,000, beating estimates
• Housing starts unexpectedly rose 3.5% in May, well above expectations
• China industrial production beat estimates, rising 13.3%
Rather, the culprit is . . . .
GREECE 10-YEAR GOVERNMENT BOND YIELD SOARS TO 18%
EUROCURRENCY DECLINES ALMOST 2% THIS WEEK